Market segmentation, cannibalization and competition in telecommunication services

The authors consider a consumer self-selection model in which a regulated firm faces two market segments with differing valuation of quality of telecommunication services and examine some economic implications from the behaviors of the firm. In the context of a regulated monopolist, even though the results depend on the degree of privatization, the firm could lower the quality of the low-end model and reduce the price of the high-end in order to alleviate cannibalization. This justifies the provision of universal service policy in the telecommunications market. Based on this self-selection model, the authors also analyze an extended model of product introduction and show that the monopolist will introduce new product with the same introduction time of social planner. However, when they consider competition among firms, the market equilibrium may not guarantee the efficient time of product introduction. [In Korean.]